Hidden costs of a minimum wage increase

Whether you buy a house, a pair of shoes, or dinner out at your favorite restaurant, the sticker price is never the price you pay. The same is true for businesses calculating exactly how much a minimum wage hike might actually cost. Beyond the obvious increase in payrolls for workers who would move from around $9 an hour to more than $13 are a host of hidden costs. Let’s consider.

Anyone who’s received a paycheck probably noticed the roughly 8% missing for Federal Insurance Contribution Act (FICA) taxes. This includes a 6.2% deduction for Social Security tax and a 1.45% deduction for Medicare tax. What some people may not realize is that employers are required to match the amount deducted from each employee’s paycheck for these taxes. The employer contribution increases if a worker’s wage increases.

To keep things simple, consider an employer’s total cost for an employer who makes the current $9 an hour minimum wage and works 30 hours a week (or 120 hours a month), and how it would rise if Los Angeles accepts Mayor Garcetti’s proposed wage increases. Staring in January, an employee would earn about $150 more a month, but this would cost the employer roughly $167 more per month; a little more than $200 each year in FICA taxes alone. Similarly, by 2017 that same employee would earn around $510 more a month, but cost the employer $550 a month. This amounts to another $500 the employer must pay annually in taxes, in addition to about $6,100 more it would pay in wages. Consequently, a 47.2% wage increase for employees translates to a 47.2% increase in the cost for their employer to pay them those additional wages.

An extra $6,600 a year might seem insignificant compared to some businesses’ total revenues, but the full effect of this increased cost largely depends on a business’s size. Does a company employ 10 people, or 100? The annual difference in an employee’s cost will add up quickly.

Thus, a wage increase of $4.25 an hour would actually cost employers paying minimum wage about $4.60 more an hour. This does not factor in other expenses that increase in conjunction with wages; at a minimum employers must also account for increased premiums for general liability insurance and workers’ compensation insurance.

Minimum Wage

Wage-Based Premiums


A few dollars, a big difference

Los Angeles roots for the underdog while riling businesses with proposals to hike the minimum wage.

Garcetti announces his plan for a new minimum wage this Labor Day weekend. | LA Times

Garcetti announced his plan for a new minimum wage on Labor Day at a South L.A. park. | LA Times

Mayor Eric Garcetti says his proposal to raise the minimum wage in Los Angeles by nearly 50 percent over three years will boost struggling families above the poverty line, making the city affordable even for busboys, cashiers, janitors and others living off $9 an hour. In turn, he says, these workers will pump dollars back into the economy.

But business owners say the pay boost – which would reach $13.25 by 2017 – could trigger side effects that would endanger businesses and cut jobs. Some companies have said they would consider skipping town altogether. Restaurants and stores that depend on their locations may need to slash labor hours or take a gamble on hiking prices. Entrepreneurs might jump ship into the underground economy. Even businesses outside of the city could wither if compelled to hire L.A.-based companies at steep rates.

At the root of this debate are 3.3 million people nationwide earning the federal minimum rate of $7.25 an hour or less. According to the Bureau of Labor Statistics, half of these people range from 16 to 24 years old, and 77 percent are white.

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Minimum Wage Worker Against Increase in Minimum Wage?

De La Cruz

David De La Cruz is against the increase

Five times a week he gets on the Metro bus and heads to work. The 30 minute ride from West Hollywood to Downtown LA isn’t all bad. It gives him time to read for school or listen to music, but there’s one major drawback.

“It stinks. Like, the bus literally stinks,” said David De La Cruz, when describing his trips to work.

The 19-year-old has come to deal with it, since he can’t afford any other way to get around town. No car, no motorcycle, no bike. And no Uber.

De La Cruz makes minimum wage as a cashier at Taco Bell, where he works between 30-40 hours each week. The increase in Metro fees from $1.50 to $1.75 (or from $75 to $100 for monthly passes) doesn’t seem life-altering, but when you’re on a tight budget like De La Cruz, every quarter matters.

“It isn’t much, but it adds up. When the bus driver told me I was like ‘ah, man!’” laughed De La Cruz.

His paychecks are spent each month on the basics: helping his older brother pay rent for their apartment, schoolbooks, and food. Finding a way to get by on $9 an hour is a grind, but he’s gotten used to it.

As a four-year-old, De La Cruz’s single mom brought their family to Los Angeles from Mexico. Even with his mom having to work several low-paying jobs to keep their heads above water, De La Cruz is certain it was the best move for the family long-term.

“Everyone says it all the time, but it really is the Land of Opportunity,” said De La Cruz when describing the United States.

De La Cruz is an English major at Cal State University, Northridge, and hopes to become a language arts teacher after he graduates. Having a Dream scholarship helps assuage his financial burden somewhat, but De La Cruz has to clock his hours each week at Taco Bell to make ends meet.

There are simultaneous initiatives in motion that aim to help people like David. While there is a ballot being circulated to raise it to $15 by 2017, Mayor Eric Garcetti’s proposal to raise minimum wage to $13.25 over the next three years has gained the most traction.

You would think if anyone would be in favor of Garcetti’s proposal to increase minimum wage in LA over the next three years, it would be De La Cruz, right?

“I’m not an economist or anything, but I really don’t think it’s a great move,” said De La Cruz. “For me it might help, but I think it would hurt just as many — or more –people than it helps.”

De La Cruz argued the customers at Taco Bell are dependent upon the prices being low, since many of them pay with their EBT cards. If Taco Bell had to pay its workers more, De La Cruz felt the prices would increase and the customers would suffer.

“And they would probably cut our hours, too!” said his co-worker Jessica as she walked by. (It was at this point I started to wonder if Taco Bell had really awesome employee benefits)

De La Cruz echoed the same sentiment, fearing a decrease in customers would lead to less hours for him and everyone else. For him, the fear of potentially losing his job outweighs the benefit of a potential increase in his hourly wage.

Critics of Garcetti’s plan have similar concerns. The LA Chamber of Commerce said on Tuesday an increase in minimum wage would “reduce, not increase the number of jobs” in the city.

Others claim if the mayor is successful it would push businesses out of LA and into neighboring cities.

Still, the reality is that for more than half of the fast food workers in America, the pay isn’t enough to get by. A joint study from UC Berkeley and the University of Illinois last year showed 52 percent of fast food workers were on government assistance, compared to 25 percent for the workforce as a whole.

“I could definitely use the extra couple bucks an hour – just to help with rent and gas,” said Walter, cashier at a local Jack in the Box who did not want to give his last name. “I hope [the increase in minimum wage] happens.”

Those in favor of the increase believe it is necessary to assist in paying for everyday items. While gas, rent and groceries have all seen price increases, wages have been static for several years.

Despite being against the Mayor’s plan, even De La Cruz had to admit he could see a benefit to an increased minimum wage. “It’d help me pay for all these bus rides,” said De La Cruz.



A Fresh and Clean Game Played by Dirt Dog

Longing to have his own restaurant for years, Philip Ozaki happily left his head chef position at Plan Check Kitchen when Richard Larios and Timothy Cam made him an offer he couldn’t refuse—-shared ownership of Dirt Dog.

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On August 1, the three welcomed the opening of Dirt Dog, whose mission is to “provide the best and unique tasting bacon wrapped hot dogs in a community oriented social environment.”

Dirt Dog locates on Figueroa Boulevard, right north to University of Southern California. What Ozaki, Larios and Cam did is simply turning the famous Los Angeles street food into an indoor business.

“It used to be street food. People have it at midnight after partying. But now we are providing the bacon-wrapped hot dogs here all day everyday,” said Philip Ozaki, Head Chef and Chief Operations Officer of Dirt Dog.

Compared to the hot dogs served by street-side vendors, Dirt Dog is using a higher quality of ingredients and coming up with more choices of flavors. It guarantees that its hot dog is made from “100% premium all beef Nathan’s 5/1 dog, wrapped in center cut bacon, topped with grilled onions & red and green bell peppers.”

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House Sauce Dirt Dog with Dirty Fries/ By Jingyi Wang


Within the first month, more than six websites have reached out to Dirt Dog and wrote about them, including LA Weekly and Cue The Critic. This Wednesday, Jack F.M. (93.1) will also join Dirt Dog to give free hot dogs.

Bacon-wrapped hot dog has never drawn so much attention before, however, it does not make any difference to the condition of traditional hot dog vendors.

Los Angeles Times published a story suggesting that the weak economy forces more Angelenos become street vendors.

According to the research group, Economic Roundtable, 43 percent of the vendors in Los Angeles prepare and serve food-related products. Their sales can add up to $42 million a year.

Unfortunately, street vending is still fighting for its legal permission to come out of the shadow. 271 citations were issued against sidewalk vending during last fiscal year, however, the number surged to 286 only for the first quarter of 2014.

Officials’ opinion varies on legalizing street vendors or not. The major concerns are the potential costs of the enforcement system, the upcoming costs for maintaining the clean streets where street vendors operate their businesses, and also the potential tax revenue.

Prices of the merchandise sold by street vendors are usually negotiable. Therefore street vendors become the major shopping destination of many low-income families. The Economic Roundtable also suggests that every dollar earned by LA street vendors will finally generates economic impacts of $1.6 on the local economy.

Enjoying the legal permission to make street food, the three owners of Dirt Dog haven’t forgot to repay the community that supported them.  They decide that for each quarter, 10% of their profits will be put into community services.

Similar to investing the community, Ozaki firmly believe that investing the workers in the restaurant is going to reward more than what you expected.

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All the workers at Dirt Dig are part-time workers. They work 24 to 40 hours a week. / By Jingyi Wang

“If you are treating them well, they will treat your customers well. Then more customers will be happy to eat here,” Ozaki said.

When new customers step in Dirt Dog, they will never feel lost in the menu. A waitress is always holding a menu and ready to explain everything on it. Many customers would like to spend several minutes with her before placing the order, and end up having the most satisfactory choice.

On Yelp many reviews mention their superb customer service, one of which even writes: “Customer service at its finest!”

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Ozaki, Laoris and Cam are glad to see that their investment is paying back. “It took us 2 months to hire people,” Ozaki said. “We interview 3 or 4 people everyday,” Laoris added.

Finally they hired 15 workers, and offered them salary all above the minimum wage.. When talking about the possible rise of minimum wage from $9 to $15, he admitted that the major cost of Dirt Dog is on labors. The cost on ingredients and marketing only account for about 10% of its whole spending.

“But we are ready to pay them more and we have already paid them more than most of the businesses here,” Ozaki said. He said after the workers in nearby businesses getting to know that they offer a better salary, there are new workers come in everyday to seek their job. And he has already hired more than four workers who used to work for their neighbors in the plaza.

“Even the manager of Five Guys wants to come here,” Ozaki said proudly.

Dirt Dog now opens from 11 a.m. to 10 p.m. but in two months, Ozaki said they will start to open at 7 a.m., serving breakfast and getting license to sell liquor for the late night hours.

No matter how the economy changes, the three owners are very ambitious and confident about Dirt Dog’s future.

“We definitely have a backup plan and but for now we are doing alright and the sales is getting better and better,” Ozaki said confidently.



Swells in cell phone business

With a growing number of cell phone repair stores in Los Angeles, how do they grasp their competencies, how do they survive, when new technology updates and brings new phones to the market every year?

In a 1500-square-foot store on South Figueroa Street in Los Angeles, Nathan Kim sat in front of his work station all alone, covering his eye with a head loupe magnifier and installing the last tiny round widget on the back of an IPhone screen. As soon as he finished up, he put the screen aside, away from the pile of different brass and gray widgets sprawled all over the desk.


Nathan Kim, owner of LA iPhone Repairs

Kim opened the iPhone repair store after he graduated from the University of Southern California with a bachelor’s degree in computer science. Seeing the fast updates and replacements in the cell phone market, many people like Kim were attracted by the potential profits and opened phone repair service stores.

In L.A., there are about 40 similar stores searchable on Google Maps. Some stores try to keep their locations concealed. Some of them run in apartment complexes; others provide door-to-door services by making appointments with repairers via phone or Craigslist (a classified advertisements website).

“They are doing home business without a proper license,” Kim said when he found an “iPhone screen repair” service on Craigslist. “This only costs $39 to fix a screen, while I charge $65.


Kim’s working station. Electronic Registration certificate hanged in front of this desk.

“If there is any problem, they won’t be responsible for that, and their customers will become the victims.” The license he referred to was an Electronic Registration certificate issued by DCA (Department of Consumer Affairs), which hung in front of his work station.

Cutting the cost and keeping the business small but efficient are the core strategies for most store owners. Running the store in an apartment would be less nerve-wracking and probably cost less money than subletting a commercial property. Having only one or three people running the store would also allow each person to take home a larger share of the pie. Also, finding good retailers to supply continuously with cheap phone parts would help a lot.

Regardless the labor cost during repairs, phone parts suppliers have the greatest power of controlling the prices. “When the iPhone 5 was first released, the part (screen) cost about 180 bucks. Now it’s 80 bucks,” Kim said.

Every time a new phone came out, large demand would promptly cause the suppliers to lower the prices of the old phones’ parts. Particularly, the value adjusted a lot when iPhone 5 was released.

“There was a mass production of them (iPhone 5 parts) – the screens, the back plates, the batteries. Everybody needed them. Everything was super cheap,” said Herbert Reyes, the owner of All Wireless World located at East Hollywood. “Repair, that’s the best thing (to earn profits).”


Screen replacement for phones of different brands @ Kim’s LA iPhone Repairs

China, the world’s factory floor, has become the biggest supplier behind these dispersed phone repair stores in L.A. “They (parts and accessories bought from Chinese retailers in L.A.) are pretty much the same quality you will get for $35 from somewhere else,” he said.

Purchasing large amounts of parts will give buyers cheaper prices than buying a single part. Thus, the cheaper prices the store owners could get from retailers, the cheaper prices they would sell to their customers. Kim offered the customers discounts depending how the prices vary. Reyes chose a new path by providing a customer discount once they did a check-in or a review on Yelp (an online service to provide consumers with information about local businesses). He would also evaluate the prices offered by the others on Yelp, and then lower his price $5 to $10 below than the average price.

The phone repair business is extremely competitive in L.A., which forces many business owners to compete with the lowest price that they can offer. Most business owners are confident and positive about their competencies.

Since cell phones have become an essential needs for most people, customers who come into the stores mostly need to get their phones fixed as quickly as possible. Having a background in Computer Science and engineering, Kim said he knew the basic structure of the phone, which made him an experienced, fast phone-fixer.

“My customers tried to fix their phone in other places but they didn’t know how to fix it; they didn’t know how to fix water damages,” he said. “I’m pretty sure they will have some problems whenever there is a new phone coming out.”

When the iPhone 5, 5C or 5S first came out, Apple did not only upgrade their iOS systems and cover them with better-looking cases, it also changed their interior design, which made the phones easier to fix.

“The first time I opened an iPhone (4), it took me 4 hours to open it and 2 hours to close it,” Reyes said. “Now I can do it within 20 minutes. (The screen of) iPhone 5 is actually much easier to fix, because you don’t have to take everything apart.”

As iPhone 6 and 6 Plus have been released on Sept. 9, most of the business owners are unsure about what will they do if someone bring a broken 6 or 6 Plus to their stores. Reyes said he would contact his suppliers to make sure they had the parts, so that he could get prepared for any upcoming damages to these new phones.


Harbert Reyes’ All Wireless World and his employee.

“I will get myself an iPhone 6. And I will open it to see which part goes with which,” Kim said.

Regardless of dealing with technological difficulties, Reyes values customer services more than anything else. “As long as you do really good customer service, people will come to you,” he said. “There is a well-established strong connection between me and people.”

To make extra profits, many owners like Kim and Reyes expand their businesses by selling accessories, such as phone cases. “People will get a phone, and they will need accessories,” Reyes said. “There is always something to sell.”

A Minimum Wage Increase Triggers Tough Decisions

Karim Kurdi, a 31-year-old Los Angeles native, says he supports a minimum wage increase, but as an owner of a small convenient store in West L.A., he realizes it might push him out of business.


“I would love to pay my employees more but it’s tough,” Kurdi said. “Right now, I’m breaking even. I’m not really making any money.”     

Some of Kurdi’s employees travel to work from the downtown area or East L.A. and earn $9 per hour. But starting Jan. 1, 2016, their wage will be increased to $10 per hour in accordance with the state law.

Despite of his support of the increase, Kurdi says even a small change in his workers’s salaries will have a significant effect on his already tiny budget.

“It’s going to be tough time,” he said. “If the minimum wage will rise again, it might affect my workers because they’ll have their hours cut.”

Kurdi, a son of a Mexican and Lebanese immigrants, opened his business, a Mar Vista Ranch Market in 2002 after hiring four workers and renting a one-story building on a busy corner of Centinela Avenue and Venice Boulevard. 

For the first six years, he enjoyed stable income from his small store. He also managed to keep his prices low while filling the aisles with Iranian dairy, Mexican-produced Coke and local poultry and meat, which attracted residents, most of them live within a walking distance from the store. 

But in 2008, things started to change. Although the number of customers who shopped at the Mar Vista Ranch Market remained stable, the average spending has declined.  

“People used to buy products for several days and now they only buy for today, just one onion and one cilantro,” Kurdi said. “Now they’re very careful with their money.”


On a recent Sunday afternoon, Kurdi stood behind a register with a sticker that read “Credit or debit cards for $10 charge .50c.” A woman stopped by a register to pay for a watermelon and two mangos. 

The shelves in the store were filled with tea, yogurts, tamales, and produce with oversized tags attached to them advertising discounts. Kurdi said he has not need to promote his business. Most people in the neighborhood know he has the best deals. 

But three years ago, national retailers like Target, CVS and Walgreen started offering fresh yogurt, strawberries and frozen lunches expanding their business from selling apparel to offering groceries and produce.

And owners like Kurdi have to keep their prices low to survive the competition. 

“We can’t raise prices too much because people will start complaining more, and we’re going to lose customers,” Kurdi said. 


The competition, severe drought and high prices on meat and produce began to drag the business down even further, Kurdi said.

“After everything is paid and after we threw a lot of fruit and vegetables away because of the weather,” Kurdi said. “I’m not really making any money.”

The minimum wage increase will add up to his already barely-surviving business.

Still, despite all the challenges, Kurdi remains optimistic. He says the increase of the minimum wage won’t happen overnight, and he still has some time to plan his budget. 

“I think the government needs to wait until the economy gets getter,” he said. “And then raise the minimum wage again.”

The Makeover of downtown Los Angeles Through Small Business

Gary Russell stood behind his counter in the Grand Central Market in downtown Los Angeles. Surrounded by those old-fashioned, bold-colored vendor signs, Russell in a casual red shirt and his clean-designed counter felt like an invader to the atmosphere of nostalgia.


Photo credit: Peiwen Jing

Nevertheless, the crowd walking inside of the market in their sportswear  brought the sense of modern to this over-100-year-old marketplace, just like what Russell did with his kombucha tea bar in the past eight months.

CustomersIt was Saturday noon, one of the market’s busiest hours throughout the week. Two customers grabbed several traditional pork carnitas tacos, stopped by Russell’s counter, tasted different flavors of the kombucha teas they produced, and got two bottles of “midnight rose” as their drinks.

“The market has been there since 1917 and I don’t know some other place in LA quite like this,” said Russell. “The dynamic, the atmosphere, and also for the new organic and healthy choices coming in.”

Photo Credit: Peiwen Jing

Russell works for the Better Booch, a small business manufacturing kombucha tea in downtown Los Angeles. They get the organic tea leaf supply from the Art of Tea in Beverly Hills, brew the teas, and then add bacteria and yeast to let the mixture to ferment for a couple of weeks.


Better Booch has been in the business for more than two years. The small crafted kombucha tea brewery now has five employees, including their husband and wife duo co-founders Trey and Ashleigh Lockerbie. All of the five people working with Better Booch began their career in the show biz as touring musicians, mainly backing up popular international artists. “After years of exhausting travel and inconsistent schedules, we decided to make a change,” said the founder Trey Lockerbie.

The tiredness of inconsistent traveling around the world was one of the personal stimulators for the Lockerbie couple to switch their gears into the small business of cottage product. Meanwhile, the policy makers also sent their encouragement, by passing the bill to support the movement.

California passed the Homemade Food Act, which went into effect in January of 2013. Since then, the cottage food industry has been booming, bringing more and more food artisans to farmer’s markets and craft shows. Food artisans crafting everything from bread, candy and cupcakes to dried pasta and nut butters were legally allowed to sell their wares to the public.

The policy benefited to the Lockerbie couple. They started to sell their products in the famers’ markets across LA, and had no idea that the Booch is selling through 40 different locations. The spot in the Grand Central Market is their only retail revenue so far.

“Through our experiences with Better Booch, we’ve seen our highest highs and our lowest lows,” Ashleigh Lockerbie described their experience of running this handcrafted small business in this way. “You don’t get very far if you don’t work as a team and whether it’s music, a tea business or navigating life’s domestic challenges.”

Photo Sep 13, 12 23 20The Booch promises only use organic loose-leaf teas from a local supplier, with no added sugar in the way of juices, purees, syrups or powders. According to Russell, The cost for Booch’s manufacturing is generally higher than the similar kind of product, even higher than a national standard.

“You earn a little bit less but you are making a better product,” Russell thought the higher cost was hard to afford, but worth it. “We want the quality of the product.”

The business keeps going up, in Russell’s word, “each week is getting busier and busier.” Nevertheless, in Russell’s opinion, the larger the sales didn’t mean the larger the profit from running the small business. Some things have made the small business running a major challenge: the cost to produce, the high rent in downtown’s commercial zone, and now the possibility of a minimum wage hike in the following years.

“I think these guys who are governing have studied economy are just making a rough guess that you are making enough to pay people,” said Russell. “If we get more small business going, they can hire more people; that is better than a lot of people don’t have work, I think that is what they need to know.”

Nevertheless, as a employee, Russell’s income has been effected by the minimum wage level. “It could be a good thing but nobody can afford to pay that. They make the small business owners pay more, but somebody will get fired,” he said.

John’s Violin Shop

“We used to have multi-million business back in 1998-2004.” John Han, the owner of John’s Violin Shop, talked about the most prosperous period of time of his business. “But when the real estate bubble hit America in 2007 we have several rough years, annual sales were as low as $200,000. It barely covered the store’s expenditure and I lost near one million dollars.” Han said.

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Located at the intersection of Olympic and Catalina, Han’s music instrument shop shares Olympic/Vermont’s liveliness as well as Catalina’s tranquility. With more than 20 guitars hanging on the sidewall of the lobby, a little show stage at the corner with drums, and keyboard, the space is divided by several electronic pianos in the middle, and some layered up sound mixers to the ceiling. All the saxophones, trumpets and violins are hanged behind the counter for sale. The doors of the two small cubicles at the back are closed, with harsh and unskilled violin sound flowing out. A small but cozy music store.


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His business kicked off in another store step away in 1994, and had to move to 6th street in 2008 after huge loss from the nationwide economic crisis. “I could not afford the rent of my old store at that time, people don’t come by but I still need to pay huge amount of electricity, rent and other daily expense. I couldn’t afford that.” Han said.

As a matter of fact, He said the business turned downward since 2004 as a result from the growing popularity of the Internet. People started to look for information online instead of coming by physical stores. Meanwhile, C2C and B2C mode entered the market and began to eat a large share, and websites such as eBay became a new platform for selling and buying products. Potential customers commonly try and test different brands of instruments in a physical store and then shop online for the best price. Accessories such as strings, drumsticks, sheet music, and tuning condenser are often discounted online. Some even call real music instrument shops as “showrooms” of online stores. Except music business, the Internet also affects other businesses, including record stores, bookstores, travel agencies and post office for the time being.

However, Han said the biggest strike was still the economy recession from 2007-2012. In terms of the competition with the internet, he believed brick-and-mortar stores won’t be stock out of the market because customers still need to come for instrument checkup, repair and music lessons. “Like this one, it’s not even a violin bridge.” Han pointed at the oversize bridge under a violin’s four strings left by a Chinese customer. “China produces some of the best violins in the world, but violin workers in China don’t have good knowledge of the instrument itself,” Han said. In his forties, Han has already earned over 20 years of business experience, and he knows what makes a good violin store. He knows violin, and in his opinion, violins are only mass-produced pieces of wood if workers don’t know much about the instruments. He has many customers buying guitars or violins from the Internet coming to him for help tuning and repair. In his defense, store owners also benefit from the Internet because they can post adds online and get more publicity.

Han moved back to Olympic when the economy started to warm up in 2012. Instead of leasing the original location he started in 1994, he chose a much smaller outlet in the same street in order to cut budget. Till today, Han’s store has not fully recovered from the nightmare in Great Recession.

So far Han is happy with the growing business, even though it is still not as good as in late 1990s and early 2000s. He has 25 students learning different instruments there, ranged from 6-year-old elementary school kid to 74-year-old grandparent. On average about 35 customers visit the store, and since it’s back to school season right now, visits are almost doubled. Except September, Christmas is another busy period as a holiday season. Light season such as February and November, Han likes to add more promotions to stimulate the business.

Currently Han earns around $300,000 to $400,000 a year. He plans to accomplish half-million revenue in 2014, and aims to fully recover before 2020.






Are Haircuts a Monthly Necessity?

This past weekend, I drove to the City of Industry to get a hair cut from the same hair stylist that has been cutting my hair since I was 3 months old.

Vincent Chan, also known as Achan, has been a hair stylist for over 25 years. He learned how to style hair at a beauty school back in his hometown, Hong Kong. He speaks English, Cantonese, as well as Mandarin. This allows him to talk to customers of all different Chinese backgrounds.


I remember as a young child, my mother drove me to Vincent’s home to get a hair cut along with my cousins in his garage on a Saturday evening. This was the only time Vincent was free this weekend between working at the hair salon in Roland Heights and spending time with his family. Throughout the years, Vincent has upgraded from a salon chair in his garage to running his own Hair Salon in the City of Industry. Vincent has established a loyalty with his customers because his hairstyles get better with time. I have noticed throughout the years that his hair cuts may not look the absolute best after you walk out of the salon, however, after you wait a week or two, the hair grows into a natural yet carefully crafted look that I have not found with any other hair stylist.

He does have competition and I will admit that I have even personally gone to another hair cutter once before. However the reason Vincent has stayed in business for so long and attracts so many customers is this ability to plan for how the hair will grow in a couple of weeks.

One time my sister and I chose to try another hair stylist simply because we did not like the previous haircut from Vincent. Initially the new hair stylist gave us both haircuts that we loved as soon as we walked out of the salon, they looked great! However, after a few days we noticed that once our hair started growing, the hair style did not grow in a way that looked flattering and we quickly went back to Vincent after two or three weeks. He instantly noticed told us “You went to another hair cutter huh? I can tell because he’s an amateur and isn’t planning for how your hairstyle will look after your hair grows.” After that instance, I have not questioned Vincent’s skills on styling hair. I have asked to keep it shorter or longer in some areas but just as a general guideline because I trust him. Vincent has established customer base in the densely Chinese populated cities in Orange and LA County. The two cities he currently works out of are Irvine and City of Industry.

When the economy hit, he did feel a hit so he had to drop his prices a bit to accommodate for it. He has worked out of salons that charge him for renting the space as well as just hair cutting for commission. The revenue Vincent generates is contingent upon how much the salon charges him for using the space as well as how much he choses to charge his customers for a haircut. The recession did affect his business but not in the way one would traditionally expect it to. More interestingly, his customers asked if he could drop his price rather than them not showing up at all. The request was being triggered by the Chinese’s culture of upholding positive face or status. Many Chinese wives still went to Vincent to get their hair done extravagantly in order give off a false perception that the recession was not as detrimental to their family as it was to others, when in reality it may have been just as bad if not worse. He told me “I guess its just the Chinese culture of wanting to save face, but hey at least that meant I still had some business”. The frequency of visiting customers did not drop but instead the price he charged did because they asked for discounts.

Vincent’s business is actually relatively casual. There are no set prices. After the hair cut is over, you simply ask him how much you owe him and he gives you a number. My haircuts have ranged from $15-30$. It really just depends on how his family is doing or how the economy is doing. While this does seem quite absurd to some individuals, this is quite typical in Chinese culture, or at least what I’ve experienced in my 20 years of growing up in a Taiwanese family. Because my family has known Vincent for so long and has always gone to see him for our hair styling needs, he has kept the price relatively consistent. The only time prices increased was between the years of 2008-2010 and he admitted that he did charge us slightly extra because he knew we were loyal customers and would not mind pitching in a little more which we did not. However since then, he has not increased the price with us as he does with other customers or new customers. With that being said, because we have established that relationship my family along with myself still tip him rather generously. As a result, Vincent has always welcomed walk-ins for us because of how many years we have been going to him for hair styling.

In the past couple of years he has opened his own hair salon called Achan Salon. Achan is his Chinese name translated to English, personally I recognize him through that name as well. He had to get a loan to buy this salon. He got his loan for a relatively how interest rate however he asked me not to include the name of the bank as well as the interest rate because well it is relatively true stereotype that Chinese people are very careful with their money regardless of how trusted of a customer you may be. I can say that the bank is a widely used bank among the Chinese community in the San Gabriel valley area.


At his new salon, he is able to hire an assistant that helps with washing the customer’s hair before they get the hair cut. I was originally planning on asking him when I first visited him but kept in mind the Chinese culture of social respect so reframed form asking him when his assistant was there. When I went back home for the weekend, I made a short visit just to ask how much he was paying his assistant. Vincent explained that the assistant is more interested in learning the hair cutting trade than making money which is why he hired him in the first place. Technically, Vincent doesn’t need an assistant, he can wash the hair himself or not wash it at all if they don’t need it, however his assistant came to him and asked if he could simply work for minimum wage to shadow Vincent while he was styling people’s hair. Vincent agreed and is paying his assistant 12$. He started by paying him 8$ an hour because it was before they raised the minimum wage, however the assistant has done good work and Vincent has naturally raised his wage to 11$ in just a couple of month.

Achan, or Vincent Chan has not only survived the economic recession but has thrived and established a loyal customer base ranging from the southern ends of Orange Country to the northern tips of Los Angeles County.

Real Estate Industry-The Business That Will Never Die

Speaking of the great depression in 2008, Craven Ji was a little bit upset: “The sales of homes dropped by 50% that year, and house prices also decreased by 30% on average.” “However,” she then added, “As the economy is recovering recent years, the market is seeing a brighter future. Home prices have recovered by approximately 25%, which almost reach that of the peak time in 2006.”


Craven Ji, a real estate agent in Real Estate eBroker Inc. in Los Angeles, has been in the business of real estate for almost 9 years. Different from her colleagues, most of Ji’s customers are Chinese. According to Ji: 67% of all her customers are Chinese immigrants while another 33% of them are overseas investors from China, either looking for investment opportunities or trying to find a new house in America. Ji does most of her business in Pasadena, Arcadia, San Marino, USC and UCLA neighborhoods where Chinese people aggregate.


“The year 2008 was a hard time for me,” she said, “There were little overseas Chinese investors that time, and the local market was also frustrated by economic recession.” Ji only sold 7 properties in 2008, which was much less comparing to her average record of 20 houses sold per year. In fact, although the U.S. interest rate was pretty low during the economic downturn, most homebuyers were frightened by the poor economic performance and were thus resistant to borrow money from the bank. “When people earned money, they’d rather pay off their debt to the bank than spend them on other consumptions. They were simply not confident with the market,” said Ji. Because most of her customers rely on bank loan to buy house, the unwillingness to borrow money would definitely impact her business. Also, as bank owned foreclosures set home prices extremely low, home sellers had to cut down their price to the same level to be competitive in the market. The two sides kept going back and forth, which resulted in a huge decline in the market volume.

Now, several years after the real estate nightmare, the situation seems to get better. “Not only does the local market start to recover, but also does overseas capital continue to pour into the U.S. market,” said Ji. According to property consultant firm CoreLogic, home prices rose by 7.4% year over year in July 2014, and are expected to rise by 5.7% from July 2014 to July 2015. Moreover, according to LA Times, overseas homebuyers and new immigrants spent $92 billion on U.S. homes in the last year. The $92 billion amounts to 7% of all money spent on U.S. homes within a year, which is 35% higher than the year before. Among those purchases, 25% of them were made by Chinese buyers. Statistic shows that they are extremely interested in the Real Estate market in southland, including the city of Los Angeles, San Francisco and Irvine, which also helps drive up home prices in these areas.

Percentage Change in Home Price Index Year After Year

Chart 1When asking about the future of real estate market in the U.S., Ji expressed her concern over the median-price house market: “One challenge we are facing now is that there are less and less affordable houses in the market.” While the demand for median price house is going up, the supply is actually going down. In July, the median transaction price was $457,000, which is 7.6% higher than that of last year. Also, the market volume, which is 7012 this year, is 12.5% less than that of last year, according to CoreLogic’s recent report. Ji is worried that if the interest rate starts going up next year, there will be more competitions in the median-price house market.


With home prices showing an upward trend and overseas cash flowing to U.S. market, some people may ask: will there be another cyclical real estate economic downturn in the future? Also, what about the housing bubble that once led U.S. economy to collapse? Well, the questions may be hard to answer now, but one thing we are pretty sure is that the housing market won’t crash, since buying house is an American dream that will never die.